WASHINGTON (Reuters) - U.S. farmers should be required to control soil erosion and fertilizer runoff from all land eligible for crop subsidies -- which would be a major expansion of "conservation compliance" rules now in place, an environmental group said on Monday.

In the report, the Environmental Working Group also advocated stricter enforcement of conservation compliance. Created in 1985, the rule requires farmers to control erosion on highly erodible land in exchange for crop supports and other federal farm benefits.

Soil erosion is down 40 percent since 1985, due partly to conservation compliance, according to U.S. Department of Agriculture estimates.

But EWG, which wants more funds for federal land stewardship programs, said 1.76 billion tons of soil is lost to erosion each year and "since 1985, mounting scientific evidence has identified runoff of fertilizer and animal manure from cropland as a major source of water nutrient pollution."

In light of the boom in fuel ethanol, EWG said conservation compliance should be expanded to cover all land eligible for federal crop subsidies and to cover nutrient runoff "associated with the increase in agricultural biofuels production."

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"Conservation compliance is a broad-brush policy instrument and should be seen as requiring a basic measure of pollution prevention on all acres getting subsidies," said EWG. "Conservation compliance will not solve the nation's agricultural water quality problem but it can reduce the likelihood of pollution and improve water quality."

Along with crop subsidies, crop insurance eligibility should hinge on a farmer taking steps to control runoff, said

EWG.

To make the program work better, the group recommended:

--USDA develop a more comprehensive definition of preventing soil loss at unsustainable rates. The new definition could include gauges of organic matter in soil or soil compaction as well.

-Erosion control should aim to hold losses at levels that do not harm soil productivity. USDA has more flexible standards now.

--USDA should conduct annual compliance reviews of at least 1 percent of fields subject to conservation compliance, and Congress should provide enough money to carry out the reviews.

To satisfy conservation compliance, farmers are required to obtain USDA approval of plans to control erosion through steps such as crop rotation, minimizing tillage, leaving crop residue on the surface to slow water flow and creating grassy buffer strips to capture erosion between fields and waterways.